This blog is devoted exclusively to American jobs and America's labor markets

Monday, February 9, 2015

The Healthy Families Act

President Obama and the Healthy Families Act

President Obama called on Congress to approve the Healthy Families Act, which would guarantee seven days of paid sick leave. He also announced a “Modernizing Federal Leave Policies for Childbirth, Adoption and Foster Care to Recruit and Retain Talent and Improve Productivity.” A brief discussion in the Washington Post [“Federal Workers Get Expanded Sick Leave”, WP, 1/16/2015] called that borrowing sick leave earned from the future. Apparently Federal supervisors can allow that already but now they cannot turn it down.

Sick Leave

The United States is the only country among developed countries that does not guarantee any paid sick days. American workers can be fired for absence from work for illness, whether its something as simple as the flu or whether it’s something that goes on for months. The 1993 Family and Medical Leave Act requires an employer to allow unpaid leave, but only those employers with more than 50 employees and only for the employees who have worked more than half time for the last twelve months. Allow really means unpaid time off without being subject to dismissal at the whim of their employer.

Not having paid sick leave pressures the sick to be at work where they can spread their germs around. Sick restaurant workers cough on your dinner or sick children spread contagious diseases around the daycare when parents cannot afford to take leave. Sick people are less productive. Some countries require employers to cover salaries when people are out sick while others have social insurance where the government pays fixed or sick leave salaries determined by formula. Some have a combination.

The Center for Economic Policy Research reported sick leave for 21 developed countries in Europe and Canada, Australia, New Zealand and Japan. Sick leave in these countries is national policy with sick pay financing, maximum amounts, and waiting periods set for all employers. A number of countries guarantee sick pay for long periods. Norway guarantees 52 weeks at full pay, Luxembourg 11 weeks, Austria 8 weeks, Germany 6 weeks, Denmark 4 weeks, Switzerland 3 weeks, Greece 2 weeks. None of these countries have waiting periods to start benefits.

Finland has 9 days of sick leave at full pay financed by the employer, but in a continued illness employees get 300 days of additional sick pay over a two year period at a rate of pay figured as 70 percent of earnings divided by 300. The rate is adjusted for high earners to be 40 percent and the whole expense is 100 percent funded by social insurance.

Germany has 6 weeks of sick leave at full pay financed by the employer funds, but in a continued illness employees get 78 weeks of additional sick pay over a three year period up to a maximum of 90 percent of regular pay. It is 70 percent funded through social insurance.

The United States has nothing, although a few states and cities have paid sick leave requirements. The National Conference of State Legislatures reports that Connecticut was the first state to require private sector employers to provide paid sick leave to their employees, with a law enacted in 2011. California was next and Massachusetts third.

Common conditions in these statutes require a dollar of paid sick leave for every thirty hours of work with payment that begins on the eighth day of illness in California. Connecticut and Massachusetts use forty hours. San Francisco and Oakland, California, Washington, DC, Seattle, Washington, Portland and Eugene, Oregon, New York City, and Newark and six other New Jersey towns have some paid sick leave. Wisconsin does not require paid sick leave and reports are that Governor Scott Walker signed a bill to prevent cities from adopting their own paid sick leave proposals.

Family Leave Policies

The Family and Medical Leave Act of 1993, already mentioned, also applies for a spouse, natural or adopted child or a parent, but still as an unpaid requirement. Since both partners in a marriage are eligible their combined leave could be 24 weeks. As with unpaid sick leave the law applies to those in their current employment for at least one year and who work at an establishment with at least 50 employees.

The National Conference of State Legislatures reports twelve states with there own unpaid family leave laws but only three states – California, Connecticut, Massachusetts – have paid family leave statutes. All three states fund their programs through employee-paid payroll taxes with administration through their respective disability programs. The California program was first to take effect July 1, 2004. Recent review shows nearly 90 percent of benefits go to new mothers who take time to be with newborn children.

Holiday and Vacation Policies

The United States remains unique among developed countries by refusing to guarantee any paid holidays or any paid vacation. Austria and Portugal lead with 13 paid holidays, Spain has 12, Italy has 11, Germany, Belgium, New Zealand have 10, Canada and Ireland 9, Australia 8, but the United States has none. There are currently ten Federal holidays for Federal workers, but private employers can do as they please.

The Center for Economic Policy Research reports France is the leader in paid vacation with 30 days guaranteed. Great Britain is next with 28 days followed by Norway, Denmark, Finland and Sweden with 25. Germany guarantees 24, Austria, Portugal, Spain guarantees 22. Eight countries guarantee 20 days: Italy, Belgium, New Zealand, Ireland, Austria, Greece, Netherlands, Switzerland. Canada and Japan guarantee 10 days, but the United States has none. Private employers can do as they please.

The U.S. Private Sector

The United States primarily relies on private business to decide employee benefits where other countries regard them as a national decision to be decided through the political process. Without a Congressional or legislative mandate sick leave, family leave, holiday and vacation pay become part of an employers job offer and a source of labor market strategy and competition.

The 2012 results from the Bureau of Labor Statistics National Compensation Survey report 61 percent of private sector employers have paid sick leave and 11 percent offer paid family leave to take care of a spouse, parents or children. Of the 61 percent with paid sick leave 76 percent have between 1 and 9 days, lower than most of the countries reported above.

However, paid sick leave and paid family leave drop off for part time employees. Only 23 percent have paid sick leave and 4 percent paid family leave. Paid sick leave and family leave also varies by industry. The leisure and hospitality industry with arts, entertainment, recreation, accommodations and food service establishments has the lowest paid sick and family leave coverage among United States industries. The National Compensation Survey reports only 27 percent have paid sick leave and 3 percent paid family leave.

Paid sick leave and family leave also vary by firm size. Only 50 percent of firms with 1 to 49 employees have paid sick leave while 82 percent of firms with more than 500 employees have paid sick leave. Only 7 percent of firms with 1 to 49 employees have paid family leave while 20 percent of firms with more than 500 employees have paid family leave.

The Bureau of Labor Statistics reports a similar pattern for paid holidays and vacation time, but with higher percentages. The National Compensation Survey report 77 percent have some paid holidays and 77 percent have some paid vacation. Only 42 percent of firms allow all 10 federal holidays.

However, paid holidays and paid vacation also drop off for part time employees. Only 40 percent have paid holidays and 35 percent paid vacation. Paid holidays and vacations also vary by industry. The leisure and hospitality industry with arts, entertainment, recreation, accommodations and food service establishments has the lowest paid holiday and vacation coverage among United States industries. The National Compensation Survey reports only 38 percent have paid holidays and 46 percent paid vacation.

Only 69 percent of firms with 1 to 49 employees have paid holidays while 91 percent of firms with more than 500 employees have paid holidays. Only 67 percent of firms with 1 to 49 employees have paid vacation while 90 percent of firms with more than 500 employees have paid vacation.

The varied employment benefits offered in the private sector suggests they are high or low depending on the same market conditions that affect wages. For example, the food service industry, mostly restaurants, pays among the lowest wages and also has the lowest benefits. Part time work does not often pay as well as full time work and it also has substantially lower benefits. Unequal benefits contribute further to inequality of income and wealth.

Company benefits make it harder to compare pay packages between firms and may allow firms with better benefits to keep employees from leaving for higher wage offers. Company benefits can also be adjusted to improve with years of service. Vacations often work this way. The National Compensation Survey reports that only 20 percent of private sector firms have 3 weeks or more of vacation after one year of service while 76 percent have 3 weeks or more after 10 years of service. Moving to another job will be less attractive if it is necessary to start over in vacation days.

President Obama’s proposal comes after six years in office and compared to other countries it is very modest. The Healthy Families Act he supports only applies to employers with more than 15 employers where paid sick days accumulate by 1 day for each 30 days on the job up to a maximum of 56 hours.

There is another proposed law not mentioned in the Washington Post article: the Family and Medical Insurance Leave Act, sometimes called the Family Act. It would allow up to 12 weeks of leave with partial income payment of 66 percent of monthly wages capped at a maximum amount. Payments would be financed with a payroll charge of twenty cents per $100 of wages. It is also a modest proposal.

These new proposals come at a time when new forms of competition pressure firms to reduce or eliminate employment benefits, especially for the service industry. The higher productivity that is possible using smart phones and GPS communications pressures companies with older traditional forms of employment to imitate or go broke. For example, companies like Uber offer taxi services through Uber’s centralized communications network, but drivers provide their own car and manage their own work and time as independent entrepreneurs. The new business model eliminates key conditions that define employment or to apply the requirement for employers to pay social security payroll taxes. Similar service arrangements are spreading to short term rental housing like Airbnb, or home repairs like Taskrabbit and home services like Homejoy.

The Health Families Act is a start, but it looks too much like too little too late.